News & Commentary

Stocks shook off their earlier losses to turn slightly higher Monday, lifting the S&P 500 to a fresh intraday high, though a batch of mixed earnings reports and weaker-than-expected existing home sales kept a damper on gains. "The Fed is done talking until next week and we're going to be subject to earnings reports and talk from Congress this week," said Brian Battle, vice president of trading at Performance Trust Capital Partners. "We could be in a holding pattern if the market can resist a selloff, but to propel higher, we need better fundamentals…we're still running on Fed liquidity and the pullback caused by the tapering talk has been reversed in the last two weeks."

The Standard & Poor's 500 stock index hit a record closing high for a third straight session. Data showing a surprise drop in U.S. existing-home sales in June also tempered the initial buying of equities and other risky assets. "I think we're stuck in a range and we're very much at the top of this range," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.

Chicago's bond rating has taken a big hit, suffering the first downgrade in the two-year tenure of Mayor Rahm Emanuel, who was warned by financial analysts of the need to take drastic — even politically daring — actions to get his city's fiscal house in order. "There's no way to sugarcoat this," said Brian Battle, director at Chicago-based Performance Trust Capital Partners, an investment adviser specializing in fixed-income products. "This is bad for Chicago."

Stocks have resumed their advance, sending the Dow and S&P 500 to new intraday highs. Brian Battle, director of trading at Performance Trust Capital Partners, says "talk of tapering is getting further and further away."

David Zalman dislikes bidding for banks — but he hates losing out on a target he really wants. The chief executive of Prosperity Bancshares (PB) in Houston gave in just a little to snag the oldest independent bank in Texas, FVNB in Victoria, for $380 million in cash and stock this week. The rising stock price is further proof that the market is more interested in price to earnings, says Dan Bass, a managing director at Performance Trust Capital Partners. The deal is priced at 17.7 times FVNB's earnings; Prosperity trades at 16.5 times its earnings. When adjusted for an expected 25% cost savings, the multiple is closer to 11.7, Bass says.

U.S. stocks rose for a second day on Tuesday, helped by strong June car sales, while concerns receded about the Federal Reserve's plans to pare its massive bond-buying program. "We're finally getting a breath of fresh air, some relief, after two weeks of taper drama," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "I think a lot of leverage is out of the Street, a lot of speculation is out of the market, and I think it's going to be quiet until we get to the unemployment number on Friday."

Houston's Prosperity Bancshares has been on a merger tear in the past 18 months, announcing seven deals including one on Monday. But the latest - an agreement worth nearly $380 million to buy First Victoria National Bank - has been brewing for years. Dan Bass, managing director of investment banking with Performance Trust, called Prosperity one of the "darlings" of the banking industry right now because of its ability to negotiate deals at a good price and successfully integrate companies. "They are a machine. They are striking while the iron is hot and doing a number of transactions," Bass said of Prosperity. "This is not the biggest deal they have done, but it is a sizable deal. They are starting to see bigger deals now and those move the needle more. They are getting larger quickly."

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